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Price of offshore wind reaches record low in latest CfD auction

offshore wind

Winners in the latest Contracts for Difference (CfD) auction for renewable energy have been announced, including three large-scale offshore wind projects which have secured strike price subsidies as low as £57.50/MWh. This is half the amount of the lowest prices produced by the last CfD auction two years ago, the government announcement says.

Dong Energy's 1.4MW Hornsea 2 offshore wind project in the North Sea and EDP Renewables' 950MW Moray East array of wind turbines will receive £57.50 per MWh produced. Both will be built in three phases with delivery of first phases programmed for 2022/23. The 860MW Triton Knoll offshore wind scheme east of Lincolnshire, which is being developed by Innogy Renewables and will begin delivery earlier in 2021, has secured a strike price of £74.75/MWh.

Government had reportedly earmarked £240m per year for the second CfD auction, but increased competition and attraction of the renewables sector for investors drove the bidding down to a total of £176m per year. Other winners include a list of eight biomass and energy from waste projects, all of which have been awarded strike prices of £74.75/MWh, with the exception of the Redruth EFW Advanced Conversion scheme which will receive £40.00/MWh. The largest of these, the Grangemouth dedicated biomass plant, will have a capacity of 85MW, but the combined output of the winners from this CfD will amount to over 3GW – enough to power 3.6 million homes.

"The offshore wind sector will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today," Minister for energy and industry, Richard Harrington, said. "This government will continue to seize these opportunities as the world moves towards a low carbon future, and will set out ambitious proposals in the upcoming Clean Growth Plan.

Green energy groups have pointed out how competitive offshore wind energy has become in comparison to other sources. The Hinkley Point C nuclear project secured a strike price of £92.50/MWh and the latest offshore wind subsidies are cheaper than the levelised cost of gas, according to RenewableUK.

“We knew today’s results would be impressive, but these are astounding," said RenewableUK chief executive, Hugh McNeil. "Today’s results are further proof that innovation in the offshore wind industry will bring economic growth for the UK on an industrial scale. The UK needs to establish new trading opportunities as we leave the European Union, and the UK’s offshore wind sector is a world leader in a global renewable energy market currently worth $290 billion a year.

“Both onshore and offshore wind are cheaper than gas and nuclear. But this young, ambitious industry can go even further. The government can help us by continuing to hold fiercely competitive auctions for future projects, as it has promised, and by putting offshore wind at the heart of its upcoming Industrial Strategy."

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